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TABLEof Contents1. Corporate InformationVision & Mission 1Message from Chairman of the Board of Directors 2Message from President & CEO 4Cambodia Economic Review 7Company Profile 92. Business ReviewCorporate Capital Structure 10Organizational Structure 13Board of Directors 14Management Team 16Events of the Year 20Customer Profile 22Products and Services 24Human Resources 27Social and Environment Management 29Geographical Coverage 303. Financial HighlightsBalance Sheet 31Income Statement 32Statement of Change in Shareholder’s Equity 33Statement of Cash Flow 344. General InformationLending and Network Partners 35Contact Addresses 36

2HKL Annual Report 2012Message from Chairman of the Board of DirectorsErik Peter GeurtsChairman of the Board of Directors2012 has been a year of consolidation andinvestment for our company. HKL achievedits objectives to increase the service level forits customers and become less dependent onforeign lending. This means that we are ontrack towards our long term goal to becomea bank dedicated to our traditional customerbase of entrepreneurs and self employed in allregions of the country. To this end we areoffering competitive financial services tocustomers who are not normally the focusof mainstream banks.Board and management are conscious of thefact that it requires investment to become afully fledged financial services company. Thisyear we implemented new software, installedthe first ATMs and continued to improve ourbranches. These investments ensure that ourcustomers are satisfied with our services.At the same time we continued to raisesavings and deposits. These increasedfrom USD 16 million by the end of 2011to USD 44 million by December 2012.These deposits finance 43% of our loanportfolio, making HKL less dependent onexternal funding from Europe and the USA.We have become a more comprehensiveinstitution, offering savings, deposits andloans. Because of this increase in savings anddeposits we are now much more embeddedin the local economy of Cambodia, a trendthat will continue in the year to follow.As a signal of our commitment to ourcustomers we ended the compulsory savingsthat were part of our previous lendingpolicy. Existing compulsory savings will bephased out and customers will be given theopportunity to save on a voluntary base atcompetitive market rates.

HKL Annual Report 2012 3HKL continuously invests in upgrading its risk management policies to ensure that savers cantrust HKL with their money. Board, management and shareholders are also seeing to it thatHKL remains properly capitalized to allow for further expansion.Worldwide lending to lower income customers has become a more sensitive issue. The PrimeMinister of Cambodia has turned his attention to this important aspect of micro finance. Weat HKL firmly believe that offering the customer a product he or she really needs is the bestguarantee to avoid our borrowers becoming overindebted. However to avoid problems ofover indebtedness the whole micro finance industry needs to make sure that proper lendingpolicies are offered. We certainly welcome the efforts of the National Bank of Cambodia inthis field. The recently opened Credit Bureau Cambodia is a good start as it will allow financialinstitutions to check their borrowers. HKL will continue to cooperate with all stakeholders inthe micro finance industry to avoid becoming overindebted.For next year the board expects results from the investments that have been made. Theseresults will be both social and financial. We will offer more tailor-made products, and continueto be financially sustainable in order to satisfy our stakeholders.Erik Peter GeurtsChairman of the Board of Directors

4HKL Annual Report 2012Message from President & CEOHout Ieng TongPresident & CEO“To grow with clients, we need to humanize ourservices, and humanizing our services begins athome. We listen and respond to our customerspromptly, so we are proud to deliver a recordprofit in fiscal year 2012 that exceeded ourheadline key performance indicators by healthymargins. Our robust performance comes fromsupport of our clients and our employees,” saidHout Ieng Tong, President & CEO.Performance ResultsOn the back of sustained economic growth inCambodia and the region, 2012 was anotheroutstanding year, and after-tax profits rose49% to USD 4.4 million from USD 3 millionthe year before.HKL total financial incomes advanced 48%to USD 23.5 million from USD 15.8 millionwith support by strong loans growth witha good loan quality. Gross loans grew 37%year on year to USD 102.8 million from USD75 million. Almost all our branches postedstrong results.Net interest income rose 47% from USD 11.5million to USD 16.9 million due to strongloans growth in Micro and Small loans thatcould have offered higher interest rates infiscal year 2012.Operating expenses rose 52% to USD 11.9million from USD 7.8 million, lower than theprevious year’s growth of 60%. Growth inexpenses was largely the result of the demandfor professional staff, training, staff capacitydevelopment and performance-basedincentives, which are investments in humancapital that we are confident will translateinto higher productivity and profitability.At USD 315,000 allowance for losses on loanswas 4% lower than the year before due tolower bad debt.With this financial performance, we surpassedour headline key performance indicator witha return on equity of 23.48% exceeding thebudget of 17.13%.

HKL Annual Report 2012 5The Improvement JourneysHKL had named 2011 as “the year of beauty and advanced technology”. We put efforts intoimproving our brand image and our MIS system and infrastructure from that year on. Ourbrand shall at all times look appealing to the growing and affluent middle and low-incomepeople who seek financial products and services which reflect their lifestyle aspirations andconfidence. Moreover, HKL successfully implemented its core banking system, which allowsHKL to transact online and in real time, providing greater convenience and freedom to ourclients to access their funds in HKL. Similarly, HKL took another leap, deploying 15 ATMs in theinitial stage.We are also working on refining our existing product with relation to terms, conditions andpricing to ensure they are competitive. Likewise, we are working on various new products tobe delivered to meet the needs of our clientele in the year to come. To gain the opportunityto grow in the competitive market, HKL continues to strongly focus on learning and staffdevelopment, internal control and operational and financial risk management as our on-goingbest practice. Best practice for middle management is to make sure of staff satisfaction for alllevels. Rolling out ATMs within branch networks and starting to implement mobile bankingsolution to leverage technology to ease our clients.HKL believes that financial achievement is not an ultimate goal. We need to support our clientsto succeed, as we will also grow with our clients. We need to humanize our services to deliverto our target group of clients, as clearly indicated in our vision and mission. The customerprotection principle remains with us as the key success for HKL sound financial services. Wehave to make sure that our customers use our financial services as the right tools to supportthe economic growth of their families.Talent Human Resouces Need to Be NurturedIn fiscal year 2012, HKL continued to focus on communicating our vision, mission and strategiesto our staff, so as to achieve real cultural enhancement fuelled by our shared HKL VALUE(Home, Knowledge, Loyalty, Value, Activeness, Leading, Unity & Equality and Effectiveness).Travel within HKL operational offices has confirmed my view that we have tremendous talentat all levels in the company. My job is to harness the talent and unleash the energy of HKLemployees. We have implemented an award program for our outstanding employees.HKL is a great place to work. Numerous initiatives have been launched to nurture talent, boostefficiency, effectiveness, productivity and innovation, and to inculcate a spirit of service. Allthese initiatives are based on the recognition that each of our employees is an important assetwith a part to play in our long-term sustainable future. We hire the best people for the joband strive to retain, motivate, empower and reward them for their contribution. In this way,and through our shared spirit, we believe our people find meaning in their work and will striveto serve from the heart. Improving our services begins at home. We engage our employeesin honesty, openness, trust and dialogue regarding their viewpoints and aspirations. Many ofour employees’ suggestions have been taken into consideration by senior management andimplemented.

6HKL Annual Report 2012The ProspectStatistics from International Monetary Fund (IMF) reveal that GDP Growth for the World inyear 2012 is 3.3%, and the growth forecast in 2013 for the world will be 3.6 %. Chinese GDP isexpecting to grow 7.8% year on year in 2012, and 8.2% is forecast for 2013. Likewise, the GDPfor Asia is projected at 5.4% in 2012, and will increase to 5.8% in 2013. The Economic Instituteof Cambodia (EIC) estimates Cambodian GDP grew 6.2% year on year in 2012, and forecast agrowth rate of 6.3% in 2013. Garment is one of the most important pillars for the Cambodianeconomy. The dominant market for Cambodian garment exports are the EU and US, takingaccount of more than 80% of total garment exports.The positive progress of the economic and business environment will bring with it furtheropportunities for growth. Competition will undoubtedly intensify within the industry as well asbring new entrances. However, HKL is confident of having a solid ground and the right formulaof working with clients to reap good returns in the long term.Giving ThanksEverything we achieved last year, everything we are today, and everything we stand for is atribute to the commitment of our stakeholders. We are profoundly grateful for the dedicationof all our staff and the loyalty of our customers, the trust of our partners and associates, andthe support of the National Bank of Cambodia, and the other regulatory authorities that haveguided us over the years.My heartfelt thanks to our Chairman, board members and shareholders for their guidance andsupport, and for entrusting me to continue to lead HKL. Similarly, my thanks also to my fellowmanagement colleagues for their support and commitment in steering HKL forward.Sincerely,Hout Ieng TongPresident & CEO

HKL Annual Report 2012 7Cambodia Economic ReviewEach year, Cambodia’s economy has experienced positive growth, despite the world economy nothaving completely recovered. Below is the economic extract on Cambodia from a speech of thePrime Minister of the Kingdom of Cambodia at the 2013 Cambodia Outlook Conference.“… Between 2008–2012, Cambodia achieved a growth rate of 5.6% per year. If excluding the 2009growth, which was the worst year of the crisis, the growth during the same period would stand at6.8% per annum. Growth for 2012 has recently been revised upward from 7% to around 7.7% of GDP.Rising public and private investment; rebound in industry – especially garment exports; continuedrobust growth in the service sector – mainly in tourism and real estate activities combined withstrong growth in the financial sector; and good performances in the industry and agriculture sectors– particularly rice production and exports have underpinned this year’s performance. The futureoutlook for Cambodia is positive, with projected annual growth of more than 7% over the mediumterm.In addition, GDP per capita increased from USD 760 in 2008 to nearly USD 1,000 in 2012, with aprojection of USD 1,080 in 2013. As a result, the poverty rate dropped to 20% in 2012, and to anestimated 19% in 2013. These achievements have made Cambodia the fifteenth fastest growingeconomy in the world during the last ten years, the fifth developing countries that can achieve theMDGs, and ranked 1st in the Asia Pacific in terms of improving social indicators.Inflation has been contained. In particular, the 19.7% inflation in 2008 caused by the soaring oil andfood price crisis dropped to 1% in 2009, followed by a slight increase to 2.5% in 2012. Inflation hasbeen kept under control to ensure favourable conditions for economic activities and the stability ofpeople’s livelihoods. Inflation is projected to be suppressed to less than 4% in 2013.

8HKL Annual Report 2012The exchange rate, especially against the US dollar, has been generally stable during the last fewyears, with a slight appreciation of the riel. In particular, the USD/Riel exchange rate was 4,065in 2008 and largely remained stable at 4,050 in 2012. Within the Cambodian context, apart fromhelping strengthening macro-economic stability, this stable exchange rate also helps to balancethe interests of both USD and Riel holders and increase public confidence in the riel. Cambodia’sinternational reserve has gradually increased, reaching USD 3.2 billion which is equivalent to fivemonths of imports.The trade deficit has been significantly reduced, declining from –15.3% of GDP in 2008 to –9.1% in2012, enabling Cambodia to maintain a reasonable balance of trade. Increased production capacityfor domestic supply and exports, along with enhanced export capacity and competitiveness havecontributed to the decline of the trade deficit.Despite the impact of the global financial crisis and several natural disasters, state revenue rose byan average of 13.6% per annum between 2008–2012, of which tax, customs and excise and non-taxrevenues increased by 15.3%, 11.8% and 11.6% respectively.Public expenditure policy and administration have also been improved and strengthened, resultingin better planning of expenditure requirements and better linkages to policy priorities as well asmore effective and efficient use of state budget. The public expenditure policy gives priority toeducation, health, agriculture and rural development sectors as well as to the improvement andexpansion of physical infrastructure such as roads, bridges, ports, electricity, clean water, schools,hospitals and irrigation systems. In particular, public expenditure increased by 17% per annum, ofwhich current expenditure and capital expenditure increased by 17.6% and 16.8% respectively.Public investment financed by state revenue increased from 711 billion riel in 2008 to 1,327 billionriel in 2012, with much focus directed to physical infrastructure for underpinning growth and socialdevelopment and protection of national sovereignty and integrity, while financing by externalsources increased from 1,926 billion riel in 2008 to 2,860 billion riel in 2012.Public investment on physical infrastructure totalled 9,852 billion riel between 2008–2012, of whichtransport, irrigation and electricity absorbed 6,821 billion riel, 2,251 billion riel and 780 billion rielrespectively. Between 2008–2012, public investment on transport increased from 850 to 1,851billion riel; irrigation investment increased from 201 to 650 billion riel, and electricity investmentincreased from 128 to 327 billion riel.From 1993 to 2012, the condition of government debt significantly improved. In particular, debtto GDP ratio was 73%, debt to export ratio was 643%, while debt to state revenue was 1,766%.However, in 2012, these ratios dropped significantly. Debt to GDP decreased to 31%, debt to exportratio decreased to 72%, and debt to state revenue dropped to 227%.In the last few years, Cambodia’s strong economic growth has somewhat cushioned our economyfrom most of the impact. Thoughout the crisis, Cambodian government has maintained a prudentand flexible macroeconomic policy while strengthening financial safety nets.”Source: Speech of the Prime Minister of the Kingdom of Cambodia at the 2013 Cambodia Outlook Conference

HKL Annual Report 2012 9Company Profile1994​​A food security project established byOCSD/OXFAM–Quebec, a Canadianorganization, provided loans to rural peoplein four communes of Pursat province.1996​The food security project was registeredwith the Ministry of Interior of Cambodiaas a non-governmental organization (NGO)called Hattha Kaksekar. In Khmer, “HatthaKaksekar” means “Farmer’s Hand” or“A Helping Hand for Farmers”. The HeadOffice of Hattha Kaksekar NGO was basedin Pursat province.2001 Hattha Kaksekar (HK) NGO was registeredwith the Ministry of Commerce with paidupcapital of USD 77,850 to transform itselfinto a limited company with a new name,Hattha Kaksekar Limited (HKL). At thesame time, HKL was granted a three-yearlicense by the National Bank of Cambodiato operate microfinance services acrossCambodia.2003 HKL increased its paid-up capital fromUSD 180,000 to USD 257,850. This camefrom capital investment from CORDAID,based in the Netherlands. CORDAID held19% of the total shares and became thefifth shareholder of HKL in addition to theexisting shareholders: HK NGO, HK StaffAssociation, Solidarité Internationale pourle Développement et l’investissement(SIDI), and a private shareholder.2007 The savings account and configuredsystems were put in place. Meanwhile, HKLincreased its capital from USD 257,850 toUSD 1,339,700. Due to its sustainability interms of finance, operation and governance,HKL was offered an MFI permanent licenseby the National Bank of Cambodia.2008 There was a new capital injection fromOikocredit, Norfund and Triple Jump inHKL. Thus, paid-up capital of HKL increasedto USD 2.7 million. Within the year, HKLintroduced the Local Money TransferService to its customers and the public toadapt to their changing needs.2010 HKL was offered an MDI “Micro-FinanceDeposit Taking Institution” License bythe National Bank of Cambodia due tothe sustainability of its operations andfinances. This license disclosed one ofHKL’s successes in providing customerswith financial services, permitting HKL toofficially mobilize savings from the public.Remarkably, the MIS team was workingon equipping the core banking system toprovide a prompt and efficient service inresponse to the company´s strategy totransform itself into a commercial bank inthe future.2011 The registered capital of HKL was raisedfrom USD 2,716,800 to USD 4,036,800to adapt to the volatility of its businessenvironment. The rise in capital wasderived from the capital investment ofresponsAbility and other shareholders.HKL selected a new core banking systemwhich enables customers to withdrawtheir money as needed at all HKL offices.2012 Hattha Kaksekar Limited’s new corebanking system successfully went liveacross the company’s distribution network.This new on-line system increased theeffectiveness of HKL’s business operations.HKL invested nearly USD 2 million USD inthe ATM and mobile banking project. Thisinvestment facilitates the offering of awide range of financial services and servescustomers fast and conveniently throughcash machines and mobile bankingservices. With ultramodern ATM andmobile banking services, customers canperform many new transactions includingcash deposits, fund transfers, remittances,mobile top-up and currency exchange, etc.The ATM service was publicly launched bythe end of 2012.

10HKL Annual Report 2012Corporate Capital StructureThe significant growth of the loans and savings portfolio as well as of the number of borrowers anddepositors has proven the continuous progress of Hattha Kaksekar Limited. Hattha Kaksekar Limitedmaintains a strong capital structure with eight strong shareholders from various countries.The shareholders of Hattha Kaksekar Limited consist of Hattha Kaksekar NGO, holding 15.46% ofthe share value, SIDI 10.09%, Oikocredit 20.02%, NORFUND 17.62%, ANM (Triple Jump) 17.62%,responsAbility 10.17%, HK SA 7.64%, and Mr. DY DAVUTH 1.38%.Supervisory Board meetings are held four times a year. The main purpose of the board meetingis to ensure the highest standards of governance, business planning, budgeting and institutionalmanagement. The work of the Supervisory Board is facilitated by a number of Board Committees:Audit Board Committee, Remuneration and Nomination Board Committee, Credit Board Committeeand the ALCO and Risk Board Committee.The following list provides a brief background of each shareholder of HKL as of December 2012.OIKOCREDITOikocredit is one of the world’s largest sources of privatefunding to the microfinance sector. Oikocredit providescredit and equity to small businesses through microfinanceinstitutions across the developing world, and directly totrade cooperatives, fair trade organizations and smallto-mediumsized enterprises. Oikocredit is based inAmersfoort, the Netherlands and has local representationin approximately 30 countries worldwide. These officessource and monitor partners in more than 65 countries.The capital needed to provide development financingcomes from investments in Oikocredit by over 40,000individuals and 6,000 organizations, including churchesand church-related organizations around the globe. Inaddition to earning modest financial returns, investorsare secure in the knowledge their money is being used tofight poverty, promote fair trade and respect our planet’snatural resources. For more information, please visit www.oikocredit.org.

HKL Annual Report 2012 11JumpANM (Triple Jump)ANMF (Novib Microkrediet fonds–ANMF, duly represented by TripleJump B.V.) is a Dutch-based mutual fund for microfinance. Thefund was created in 1999 by the Dutch development organizationOxfam–Novib and the Dutch ethical bank ASN Bank N.V. It wasone of the first regulated mutual funds created to allow the Dutchpublic to invest in microfinance. By the end of 2011 more than10,000 private investors had taken advantage of this opportunityby investing in the fund. The fund is retailed by ASN Bank to itscustomers. The assets are managed by Triple Jump B.V., a specialistmicrofinance investment manager. At the end of 2011 total assetsof ANMF fund amounted to EUR 231 million. This amount was usedto provide EUR 181 million in senior loans, sub debt and equity to92 microfinance entities across five continents. More informationon the investments by ANMF and other funds managed by TripleJump is available at www.triplejump.eu.NORFUNDNorfund is wholly owned by the Norwegian government andcommenced operation in 1998. The company is structured as aseparate legal entity with limited liabilities (Norfund Law), andthe chairman and the board of directors are appointed by thegovernment. The purpose of Norfund is to invest risk capital in privatecompanies in emerging markets, making these companies grow ina sustainable way. The institution currently receives its investmentcapital from the Norwegian government. The total capital ofNorfund as at the end of 2012 was about USD 1,400 million, whichis expected to grow steadily for several years to come. The aim ofNorfund is to be a leading investment fund for emerging markets bycombining a strong financial position with high-quality investmentmanagement skills and extensive international experience. Themain investment areas of Norfund are in financial institutions, SMEinvestment funds, renewable energy and agriculture. To learn moreabout Norfund, please visit www.norfund.no.responsAbilityresponsAbility Social Investments AG is one of the world’s leadingindependent asset managers specializing in the developmentrelatedsectors of emerging economies such as finance, agriculture,health, education and energy. responsAbility provides debt andequity financing to non-listed companies with business modelsthat target the lower-income segment of the population andcan thus drive economic growth and social progress. Servingboth institutional and private investors, responsAbility offersprofessionally-managed investment solutions ranging from mutualfunds to individual mandates. Founded in 2003, responsAbilitycurrently has assets under management of USD 1.4 billion, whichare invested in over 400 companies in around 80 countries.responsAbility is headquartered in Zurich, Switzerland and hasoffices in Lima, Mumbai and Nairobi. Its shareholders include abroad range of reputable institutions in the Swiss financial marketas well as its own employees. responsAbility is registered with theSwiss Financial Market Supervisory Authority FINMA. For furtherinformation visit www.responsAbility.com.

12HKL Annual Report 2012Solidarité Internationale pourle Développement et l’investissement (SIDI)International Solidarity for Development and Investmentis a social investor that falls under the category of SolidarityCompany. It was created in 1983 and is a subsidiary ofa development NGO, CCFD–Terre Solidaire (www.ccfdterresolidaire.org).SIDI promotes a social and cooperativeeconomy through the development of individual and collectiveeconomic activities, which are initiated locally, in the countriesof the Southern Hemisphere. Its activity consists of providingfinancial and technical support to its partners, the LocalFinancing Services (LFS), which provide financial servicestailored to groups excluded from traditional banking systems.SIDI also supports initiatives designed to increase the income ofsmall rural producers. SIDI’s goal is to promote the developmentof these structures in order to guarantee the sustainability ofservices – such as savings, loans, training, market access andthe sharing of risk – which SIDI provides to its beneficiaries andto contribute to development.HKSA., LimitedHATTHA KAKSEKAR STAFF ASSOCIATION (HK SA)Hattha Kaksekar Staff Association (HKSA) is a legal entity whichreceives financial contributions from HKL staff. All HKL staffare permitted to acquire HKL shares. The size of the dividendgiven to the staff as shareholders depends on the net profit ofHKL from the previous fiscal year. This dividend will usually bedeclared in March or April of the upcoming year. As of 2012,the shared capital of HKSA to HKL accounted for USD 308,600and represented 7.64% of the total shares.HATTHA KAKSEKAR NGO (HK NGO)HK NGO was originally transformed from a Food Security Project in 1996. In October 2001, this NGO wasrestructured to become a shareholder of Hattha Kaksekar Limited (HKL) and the assets and equity of the NGOwere then transferred to HKL. Initially, HK NGO’s share amount was USD 35,010, representing 45 % of thetotal shares of HKL. With an additional amount transferred from some of HK NGO’s subordinated loan, HKLNGO increased its share investment to USD 128,550. As of 2011, the share capital of HK NGO to HKL accountsfor USD 623,900, represents 15.46 % of the total shares.Dr. DY DAVUTHDr. Dy Davuth has experience in various positions such as Administrative and Account Manager (JVK NAGAMOVERS), Finance and Administrative Manager (Microfinance Institution), Member of Project CoordinationCommittee (ADB Project), Vice Rector Academic and Chairman of the Academic Council (Build BrightUniversity), and Business Development Specialist of SMEC International Pty. Ltd. Currently, he works as VicePresident of Build Bright University, Phnom Penh, Cambodia.

HKL Annual Report 2012 13Organizational Structure

14HKL Annual Report 2012Board of DirectorsErik Peter Geurts, Chairman of the Board of DirectorsAfter working as a special credits officer for an international factoring company,Mr. Geurts started in 1997 as a microfinance investment officer with Triodos Bankin the Netherlands. He worked on both microfinance and fair trade projects,mainly in Latin America. There, he gained experience with equity deals of variousgrades of complexity. His experience includes several board memberships ofregulated financial institutions in Latin America and Asia. In 2006 he startedworking for Triple Jump B.V. to assist with building up its equity portfolio. Erik iscurrently Manager Equity Investments of Triple Jump.Albert Hofsink, memberMr. Albert Hofsink, Director Finance and Administration of Oikocredit, has beenworking for Oikocredit since 1998. Mr. Hofsink has a degree in accounting fromthe University of South Africa. Prior to working for Oikocredit, he worked inthe auditing practice of the audit firms Moret Ernst and Young in Utrecht, theNetherlands and KPMG and Taylor and Geerling in Pretoria South Africa. Heis currently a board member of Maanaveeya Investments and Holdings Ltd. inHyderabad India and a member of the advisory board of the 4 F Fund in Leusdenin the Netherlands.Christoffer Christensen-Røed, memberChristoffer Christensen-Røed (born 1942) completed his MBA in Economics andBusiness Administration in 1966 from Norges Handelshoyskole in Norway. He iscurrently Investment Director of the Financial Institution and Funds Departmentat Norfund, the Norwegian Investment Fund for Developing Countries, which hejoined in 2001. Christoffer has extensive experience with investments in banks andfinancial institutions in emerging markets and has represented Norfund in severalboard appointments. Since 1966 he has held various management positions incommercial banking within credits and equity. In 1980 he was appointed GeneralManager of Den Norske Credit bank, the largest commercial bank in Norway. From1977–80 Christoffer worked as Deputy Regional Director of Nordic Bank Ltd. inSingapore covering the Asia–Pacific market.Dy Davuth, memberDy Davuth has experience in various positions such as Administrative andAccount Manager (JVK NAGA MOVERS), Finance and Administrative Manager(Microfinance Institution), Member of Project Coordination Committee (ADBProject), Vice Rector Academic and Chairman of the Academic Council (BuildBright University, and Business Development Specialist of SMEC International PtyLtd. Currently, he works as Vice President of Build Bright University, Phnom Penh,Cambodia.

HKL Annual Report 2012 15Lonh Hay, memberMr. Lonh Hay retired in October 2008 after more than 25 years’ service with theNational Bank of Cambodia, the Central Bank. His last position at NBC was asDeputy Director General and Advisor to the Governor. During Mr. Lonh Hay’scareer at the Central Bank he worked in various departments and was exposedto international and regional financial activities, giving him a wide range ofoperational and international experience. He also gave time to several centralbank publications, namely the Bulletin of Monetary Statistics and Balance ofPayments. Mr. Lonh Hay attended the Royal University of Phnom Penh beforethe war years and also took specialized courses in Italy, France, Austria and theUnited States.Michael Fiebig, memberMichael Fiebig (born 1972) is Head Financial Institutions Equity at responsAbilitySocial Investment AG, Switzerland. He has accumulated 16 years of banking,microfinance and investment experience in more than 25 countries, specializingin private equity investments in banks and microfinance institutions, corporategovernance, bank strategy and business development, credit risk management,as well as management coaching and training. Michael currently serves on theSupervisory Boards of three microfinance banks in Asia. He holds a DiplomKaufmann degree (equivalent to a Master of Business Adminsitration) from theFreie Universität Berlin.Pierre Berthon, memberPierre Berthon (born 1948) completed his Bachelor of Law in 1970 and graduatedfrom the Institut D’Etudes Politiques de Paris in 1973. He is currently a consultantwith Solidarité Internationale pour le Développement et l’investissement (SIDI),a French company incorporated in 1983, which he joined in July 2009.Prior to that, he held numerous management positions in commercial bankingwhich included Credit Du Nord Banking Group, BNP Paribas Banking Group.Ms. Tal Nay IM, memberMs. Tal Nay IM retired in 2010 after more than 30 years’ service with the NationalBank of Cambodia (NBC) and commercial banks. Her last position at NBC wasDirector General of four main departments: Banking Supervision Department,Banking Operations Department, Statistics and Economic Research Department,and Foreign Exchanges Department. Ms. Tal Nay IM obtained a Bachelor’s Degreein Economics from the Faculty of Law and Economic Sciences, Cambodia in 1974.She also attended several specialized courses overseas.

16HKL Annual Report 2012Management TeamHout Ieng Tong, President & CEOWith his broad range of experience in microfinance, Mr. Hout Ieng Tong isan outstanding performer in both financial and non-financial management.Tong cofounded HKL in 1996 and has represented HK NGO since then. Besidescompleting a Bachelor’s Degree in Agriculture in 1991, Tong has attended a largenumber of local and international training programs in staff management, financialmanagement, planning and leadership, HR management, and microfinancemanagement. Moreover, as someone who seeks further knowledge, Tongcompleted an MBA at Build Bright University in addition to attending many othermicrofinance related workshops in the USA, the Philippines, Indonesia, France,Germany and many other countries.Im Vandith, Vice President & CAOVandith began her career in the early 1992. After working for UNTAC during the1992 national parliamentary elections in Cambodia, she joined the America ReliefCommittee. With a Bachelor’s Degree in Accounting (1995), Vandith joined HKLin 1995. Here, the hands-on work experience and microfinance-related trainingprograms conducted both within and outside the country helped her be a keyplayer on the team. Additionally, Vandith obtained an MBA degree from BuildBright University in August 2008Rath Sarun, Vice President & CFOSarun has more than 13 years’ technical experience in accounting and finance in financialinstitutions and the telecommunications industry. He is now in charge of MIS, Finance andTreasury Department. He joined HKL in June 2007 as Assistant to the General Manager.He had five years’ experience with ACLEDA Bank in the Finance and Treasury Section, andthree years’ experience as Finance Manager in AZ Communications Co., Ltd. He received anMBA in Finance from Pannasastra University of Cambodia, and attended training / seminarslocally and abroad in many areas including finance, accounting, risk management and IT.Toch Chaochek, Vice President & COOChaochek is Vice President and Chief Operations Officer of HKL. He oversees HKL’sbusiness operations including loans, savings, business development and branchesmanagement. He joined HKL in March 2006 as Operations Manager and waspromoted to Vice President and COO in September 2011. Prior to joining HKL hestarted his career in 1999 in a domestic company as Assistant Marketing Manager,spending the majority of his time in the Credit Division of ACLEDA Bank. Chaochekreceived an MBA in Finance and Banking from the University of Cambodia in 2006and in 1999 earned a BBA in Marketing from the National Institute of Managementas well as a Bachelor of Law from the Faculty of Law and Economics.

HKL Annual Report 2012 17Bong Benly, IT DirectorPrior to joining HKL in December 2002, Benly spent more than 10 years withthe Canadian Training Center Project as a key player in the IT field. Becauseof his vast experience in the charity field coupled with ongoing IT-relatedcourses, Benly has always been a key player in the IT department at HKL. Inaddition to his technical background and experience, he has also benefitedfrom various training programs in business administration, marketing,accounting and management. He continues to pursue further IT courses toupdate his expertise, and during 2011 attended numerous conferences andseminars on ICT, hardware and software technology, and on banking solutionsin Cambodia and in other countries. His continuing education ensures that hehas a wide perspective of the field, which is necessary for him to incorporatehis knowledge of IT with the services provided by an MFI such as HKL.Chen Boranchanborath, Legal & Company Secretary DirectorMr. Chen Boranchanborath joined HKL in December 2011 as Director of LegalDepartment and Company Secretary. Prior to joining HKL, Boranchanborath hadmore than 10 years’ experience in ACLEDA Bank Plc., including its subsidiary,ACLEDA Bank Lao Ltd. For the last four years he has held the position of LegalDepartment Manager and Company Secretary (ACLEDA Bank Lao Ltd.). In termsof education, he earned a Bachelor of Private Law from the Faculty of Law andEconomics in 2000 and is pursuing a Master of Law at the Royal University of Lawand Economics.In Socheata, Treasury DirectorSocheata joined HKL in 2001 and has held several positions in HKL, both at branchlevel and at head office level. In 2007, Socheata was appointed as FinancialController and was then promoted to Finance and Accounting Unit Managerin 2008. After that, on the basis of her knowledge, skills and work experience,Socheata was promoted to Deputy Head of Finance Department in 2009. In2012, she was promoted to Treasury Director. Socheata obtained a BBA majoringin accounting in 2007 and a Master’s Degree in Finance and Banking from BuildBright University in 2011. She also attended various training courses includingin budgeting, financial analysis, accounting and finance policy in MFI, creditappraisal, internal audit, trade finance and others.Khou Buntry, Finance DirectorPrior to joining HKL in July 2008 as Finance Manager, Buntry spent more than sixyears in the private sector: two years as an Accountant at Canadia Bank Plc andmore than four years as a Finance Manager at Marie Stopes Cambodia. He also hasmany years’ experience with international non-governmental organizations (e.g.as an Accountant with Medecins Sans Frontieres and more recently as a FinanceManager with Room to Read Cambodia).

18HKL Annual Report 2012Ly Siven, Credit DirectorPrior to join HKL in May 2000, Siven spent approximately eight years with theNational Bank of Cambodia and a period of time in the Ministry of Public Worksand Transport in Siem Reap province. At HKL, he has held several positionsfrom field officer such as Teller and Credit Officer, and was then successivelypromoted to Chief Credit Officer, Branch Manager and Regional Manager. Withhis commitment, talent and honesty, Siven was promoted to Credit Director inearly 2012. Returning to his educational background, Siven holds an MBA and BBAin the field of management and has participated in numerous training sessionsand workshops, both domestic and abroad, mostly in management and leadershipskills.Mech Sokmetrey, Marketing DirectorPrior to joining HKL in September 2005, Metrey spent more than three yearsin both product and service companies in the field of sales and marketing aftergraduating with a Bachelor of Business Administration majoring in Marketing fromthe National University of Management in 2003. At HKL, in addition to his extensivedirect involvement in the field of marketing, Metrey has been exposed to manydiverse practical training programs on management, leadership, productivitymanagement, customer relationship management, balance scorecard, microinsuranceand marketing, conducted both locally and abroad including in Mongolia,Taiwan, Korea and India.Nhean Virak, Savings & Deposit DirectorMr. Nhean Virak joined HKL in 2002 and worked for almost four years as internalauditor in the Internal Audit Department, Head Office. As a result of his goodperformance as internal auditor, he was promoted to Branch Manager of KampongCham province in early June 2006. On the basis of his wide-ranging knowledge andskills in branch management, he was promoted to Regional Manager. He becameDirector of Savings and Deposit Department on January 01, 2012. In terms ofeducation, Virak earned his MBA in the field of management in 2010.Phat Thomas, Administration DirectorThomas restarted his career at HKL in 2009 after joining the company for a periodof time as Human Resources Manager. Thomas had worked at HKL for four yearsand has more than five years’ experience with a microfinance institution in the fieldof human resources and administration. He has also attended practical trainingprograms on staff management, leadership, communication, administration, andhuman resource management. Thomas also attended training programs abroad:in the Philippines on practical human resource exposure and in Japan on thedevelopment of SMEs. Thomas has an MBA in the field of management.

HKL Annual Report 2012 19Ros Vol, Internal Audit DirectorMr. Vol joined HKL in January 2008 as Internal Audit Manager. Vol started workwith CRS and TPC in 1999, and spent more than three years as internal auditor andfive years as branch manager. Besides his practical work experience as an internalauditor and as a branch manager in Svay Rieng, he has been exposed to numeroustraining programs such as auditing for internal fraud, bank and MFI reviews andaudits of customers/borrowers’ project management, IT internal audit training,risk management, performance analysis of MFIs, effective branch management,small and medium enterprise lending, customer service, legal guidance, VBNKmanagement training, internal auditing, and motivation and leadership. He alsoholds a Master’s degree from Preston University. In 1998, he earned a Bachelor’sDegree of Management from the Maharishi Vedic University.Sem Souphoan, Human Resource DirectorMr. Sem Souphoan joined HKL on December 1, 2010 as Head of the Human ResourcesDepartment. He has 23 years’ experience working in different sectors, including aten-year track record in human resource management, organizational development,human resource planning and leadership. His last three positions were: 1) World VisionCambodia from March 1994 to December 2006, working as Administrative Assistant,Health Program Assistant, Child Sponsorship Department Manager, PersonnelManager, before being promoted to HR Director; 2) from 01 January 2007 to 23August 2009 worked for World Vision Timor-Leste as Human Resources Manager; and3) from 24 August 2009 to 23 August 2010 worked with SAMES (Central Pharmacy),Ministry of Health, Government of Timor-Leste as HR and Administration Advisorunder a World Bank financed HSSP-SP project (a Health Sector Strategic PlanningSupport Project). Souphoan holds a Masters of Business Administration in LeadershipDevelopment, from Eastern University, Philadelphia, USA and a Bachelor’s Degree ofPublic Law from Norton University, Phnom Penh, Kingdom of Cambodia.Touch Lina, Risk & Compliance DirectorPrior to joining HKL in March 2005, Lina spent more than one year in anon-governmental organization in the field of insurance service provided topoor people across rural areas in Cambodia after graduating with his Bachelor ofBusiness Administration majoring in management from the National Institution ofManagement in 2003. At HKL, Lina played a significant role as Head of the CreditManagement Unit and Head of the Risk Management Unit. He has considerableexperience in portfolio management and credit risk analysis and he also run avariety of training courses related to financial analysis and credit management.Lina also spent more than three years in the field and attended many practicaltraining programs on management, leadership and risk management standardsconducted both locally and abroad including in the Philippines, Vietnam andLuxembourg.

20HKL Annual Report 2012Events of the YearThe official HKL’s ATM launch on 27 December 2012Intercontinental Hotel, on 27 December, 2012, at the official HKL ATM launch ceremony whichis presided over by H.E. OUK MALY, Deputy Governor of the National Bank of Cambodia,representative of H.E. CHEA CHANTO, Governor of the National Bank of Cambodia, Board ofDirectors, President and CEO, Vice Presidents, staff of HKL, local authorities, as well as distinguishedguests to witness and offer their congratulations on this achievement.A leading banking and technology service provider, PBC Banking and Technology has been selectedas HKL’s partner to bring the latest version of ATM software called “Smart Vista” to Cambodianpeople. With this software, HKL will provide clients with a service they have never beforeexperienced. The client can access many types of financial and non-financial transactions 24/7such as cash deposit, cash withdrawal, balance inquiry, mini-statement, fund transfer, remittance,money exchange, mobile top up, etc. Interestingly, even if the customer does not have an HKL ATMcard, he/she can also use our ATM, using cardless functions to conduct various transactions suchas cash deposit, remittance pay, remittance receive and currency exchange.As result, by the end of 2012, HKL installed 15 ATM machines in Phom Penh Capital City and thereis potential to do the same in provinces such as Kandal, Seam Reap, Kampong Cham, Battambang,Preah Sihanouk, Banteay Meanchey, Kampong Thom, Takeo, and Svay Rieng. As planned, HKL willinstall ATM machines across the country.Hattha Kaksekar Limited donated study materials to outstanding studentsIn October 2012, Hattha Kaksekar Limited donated study materials to the outstanding students ofPursat High School and Boeng Trabek Khang Keurt Primary School, in the academic year 2011–2012,ranked from number 1 to 3 of each class, a total of 297 students. The study materials that had beengiven to them include bags, notebooks, pens, pencils, HKL’s t-shirt and 5,000 Khmer riel in cash. Theoutstanding student has also received materials according to who received the best study result.Further, on that occasion, HKL also donated materials to both schools, such as whiteboards, tablesand clocks; and gave teachers some gifts.

HKL Annual Report 2012 21The donation program aims to thank local authorities and customers who have supported HKL sincethe beginning. It is also to encourage students to study harder so they become one of the foundationsof the country. Moreover, it shows that HKL is deeply involved in human resource development,especially in the education sector of Cambodia to improve the quality of education.Grand opening of the new Kampong Cham branch office on 10 December 2012As part of its commitment to be an excellent financial service provider with a large distributionnetwork, on 10 December, 2012, Hattha Kaksekar Limited officially marked the grand opening ofa new standardized branch of the Kampong Cham office under the presidency of H.E. Neav Chanthana,Deputy Governor of the National Bank of Cambodia, representative of H.E. Chea Chanto,Governor of the National Bank of Cambodia and H.E. Lun Limthai, Deputy Provincial Governorof Kampong Cham Province, representative of H.E. Hun Neng, Provincial Governor of KampongCham. The ceremony commemorated HKL’s constant striving to offer the highest quality servicesto clients and a positive working environment for staff. It also illustrated the gradual growth ofHKL to the public.

22HKL Annual Report 2012Customer ProfileCustomers are valued highly at HKL, whether they are from rural or urban areas. HKL is committed toensuring customer satisfaction by providing them with the services and products they need. HatthaKaksekar Limited is therefore striving to develop a full range of financial services by adding newinnovative products and services. Conditions for access to these services is always kept simple –for instance, the required conditions for applying for a loan consist of being adult, having a clearpurpose for utilization of the fund and having a good reputation, not being involved in any offence,and possessing permanent residency inside the operating area, a certificate of identity as well as aproperty owner’s certificate.By December 2012, HKL has given loans valued at USD 102 million to 74,559 active borrowers.Meanwhile, HKL has USD 44.25 million in deposit balance with 108,037 depositors. The graph belowshows the number and classification of borrowing customers.

MARKET SHAREHKL Annual Report 2012 23

24HKL Annual Report 2012Products and ServicesThe improvement of existing products and services and development of new financial services arekey action areas for HKL to enlarge its market share and retain satisfied customers. In respondingto these concerns, many activities have been taken to update existing products and initiate newproducts.As result, the financial products currently provided by HKL have increased into seven main categories:Individual Loans, Savings Accounts, VIP Savings Accounts, Planned Savings Accounts, Term DepositAccounts, Local Money Transfer and MyATM services. Interest rates for loans and for deposits havebeen revised taking into consideration response to the market situation and customer needs.Individual LoanWith attractive interest rate, the clientcan choose from three currencies –KhmerRiel, Thai Baht, USD – to enhance businessgrowth. Loan sizes are adapted to businessneeds. To access a full range of financialservices, the client only needs to attend anyoffice of Hattha Kaksekar Limited.Savings AccountOpening a savings account permits customersto deposit and withdrawal any amount,at any branches, and at any time aroundthe clock through HKL’s ATM network. Thesavings account is one of the best paths tohelp customers maximize the return on theirsavings as well as assure the safety of their cashdeposit. The minimum balance required forthis account is only USD 5, allowing customersto get interest rates of up to 4% per annumdepending on the currency. When openingthis account, customers will receive savingspassbooks free of charge.

HKL Annual Report 2012 25VIP Savings AccountHKL’s VIP service provides high interestrates. This product is specifically designedto meet the needs of advanced customers,both individuals and entities. The customersor entities opening VIP Savings Accounts willreceive the highest levels of service. Theminimum balance for this kind of accountis USD 1,000 or its equivalent in anothercurrency. HKL currently offers a specialhigh interest rate of up to 4.5% per annumaccording to the currency.Planned Savings AccountThis account requires customers to makecash deposits in instalments based on theircash flow, which might be on a daily, weekly,or monthly basis at the specified maturitydate. To open this account, the customermust have a minimum deposit of USD 10 .Customer can get higher interest rates ofup to 7.5% per annum based on the depositterm and currency.Time Deposit AccountA Time/Fixed deposit account is the bestchoice for customers who have a largeamount of money available as it providesthem with a high return. The minimumbalance for this account is USD 50 or itsequivalent in other currencies, and theannual interest rate set at 8.7% dependingon the deposit term and currency.

26HKL Annual Report 2012Local Money TransferHattha Kaksekar Limited provides customerswith the right solution for local moneytransfer service. Customers can easilytransfer money to relatives, business partnersand other recipients regardless of distance.This service is provided to customers withreliability, safety and speed. With the moneytransfer service of HKL, customers no longerface problems when transferring money totheir loved family members, relatives andbusiness partners across the countrywidethrough its 122 branch offices and with thecheapest transfer fee. More than that, thereare money transfer methods that customerscan select, such as cash to cash, cash toaccount, account to cash, and account toaccount transfer.MyATM ServiceThe ultramodern nationwide ATM networkis unique in Cambodia. With this modernATM service, the customer can performboth cash and non-cash transactions such ascash deposit, cash withdrawal, fund transfer,remittance, currency exchange, mobile topup, balance inquiry, mini-statement, accountmaintenance, etc. With these transactions,the customer has the choice to select theirpreferred currency: Khmer riel, USD or Thaibaht.

HKL Annual Report 2012 27Human ResourcesOur People Our HeartOur management staff strongly believe that our dedicated staff are the heart of Hattha KaksekarLimited. That is why HKL management has decided on its comprehensive and competitive humanresource policies and procedures. These include recruitment, health assistance, compensation,capacity building, and an improved working environment. These policies and procedures aredeveloped with the aim of ensuring better pay and benefits, a friendlier working environment,greater staff well-being, and job security.To support the countrywide operational areas with 122 offices, 1,278 staff have been employed byHattha Kaksekar Limited, including 296 staff who were recruited in 2012.Numbers of Employees Vs Numbers of Recruited 2012*Total Staff*Recruited*Recruitment included newly recruited and replacement for staff have been dismissed.

28HKL Annual Report 2012Our People Our PrideWe are proud of our people, who have built up an excellent culture in HKL. With such a strong culture,we have formalized our employee code of conduct to ensure HKL staff members are well informedand acknowledged for their uniqueness. So we promote the following culture and behaviours:Self development is a key to make long term move of institution.A diverse and involved team leads to better decision makingEmployees are able to provide quality services to customersEach person has his/her individual specialty to be respectedEmployees live and work with dignityRelationships and communication are nurtured among stakeholdersNeatness, order, and personal grooming are evidence of respect for self and for HKLAll employees shall display loyalty and integrity in the performance of their dutiesTo maintain the confidentiality of information is to respect ownership of the informationGifts or bribes are not toleratedMoney laundering is to be preventedCompliance is a mustHigh commitment leads to great resultsConflicts of interest must be disclosedAssets and resources are to be used properlyThis year, 2012, we also have great pride in successfully managing staff turnover at a ratio of lessthan 7%.Our People Our DevelopmentAs we believe the more people develop, more the company grows, HKL has invested in staff capacitydevelopment through various programs for both internal and external courses. A total of 7,183participants have been trained through a total of 432 courses. From the chart presentation, we arevery delighted that HKL are resourceful in sharing, training and coaching our staff members. HKL’smanagement has conducted training of their 6,312 staff members, which is 87.87% of the totaltraining participants. Each staff member has attended an average of at least five courses.Numbers of Courses and Participants in Training Program 2012Our People Our CommitmentWith our people, we build a strong commitment towards achieving a higher level of employeesatisfaction through the retention strategy, capacity development strategy and compensation strategy.​

HKL Annual Report 2012 29Social and Environment ManagementHKL’s Social and Environmental Management is aligned with the company’s mission and vision.With the support of local and international technical assistance, HKL has successfully created andimplemented social and environmental performance management strategies.HKL tries to assist customers to accumulate assets and develop a sustainable business in order togenerate a reasonable income to support their family and send their children to school as well asto improve the condition of their homes, particularly for rural people who generate only a smallincome. To achieve this goal, HKL has continued to expand its areas of operation across the countryto improve access, and develop and update products and services to match their characteristics andneeds. Women customers are considered as a priority and an important target for HKL. As result, 76%of customers are now women. HKL also makes efforts to reduce unemployment through creating aspecific financial services for small and medium entrepreneurs which make more jobs available toour Cambodian people.In addition, to ensure its long-term sustainability within a competitive market environment, HKL iscommitted to accessing more sources of funds from alternative savings and lenders/investors tosupport institutional growth, while at the same time maintaining the efficiency and effectiveness ofits operational costs to ensure profitability.Importantly, to build the institution’s image among the public, HKL tries the best afford to providecustomers with fast and convenient services by creating alternative solutions, products and services.Besides, the client protection principle has been developed and applied to all stakeholders to ensurethat customers have been taken care of and institution is able to manage performance quality. Also,HKL has actively participated in rural economic development and the enhancement of the quality ofsocial performance in order to attract new investors and donors.HKL has developed and applied a social and environmental policy which is in compliance withthe regulations of the royal government of Cambodia, especially the National Bank of Cambodia.Moreover, the MIS system has been customized to store data, produce regular reports and providecustomer data analysis related to social and environmental performance as needed.

30HKL Annual Report 2012Geographical Coverage

HKL Annual Report 2012 31Financial HighlightsBALANCE SHEETFOR THE YEAR ENDED 31 DECEMBER 20122012 2011USD Riel ‘000 USD Riel ‘000ASSETSCash on handBalances with the Central BankBalances with banksLoans to customersOther assetsProperty and equipmentIntangible assetsDeferred tax assetsTOTAL ASSETS2,036,3196,100,5216,143,087101,783,1592,443,6922,532,4631,933,624-122,972,8658,135,09424,371,58124,541,633406,623,7209,762,54910,117,1907,724,828-491,276,595687,8721,754,9946,017,37074,535,8601,515,678911,7381,187,345174,87586,785,7322,778,3157,088,42124,304,157301,050,3396,121,8223,682,5104,795,686706,320350,527,570LIABILITIES AND SHAREHOLDERS’ EQUITYLIABILITIESDeposits from customersBorrowingsAmounts due to shareholdersSubordinated debtsProvident benefitsOther liabilitiesDeferred tax liabilityProvision for income taxTOTAL LIABIBLTIES44,254,97040,065,01110,472,6662,000,000629,2952,957,936144,248561,681101,085,807176,798,605160,059,71941,838,3017,990,0002,514,03411,816,954576,2712,243,916403,837,80015,775,63037,178,41310,447,7562,000,000419,5062,616,941721,54269,159,78863,717,770150,163,61042,198,4868,078,0001,694,38510,569,8252,914,308279,336,384SHAREHOLDERS’ EQUITYShare capitalShare premiumLegal reservesOther reservesRetained earningsNet equitySubordinated debtsTOTAL SHAREHOLDERS’ EQUITY4,036,8005,515,704403,680295,16210,906,39321,157,739729,31921,887,05816,127,01622,035,2371,612,7021,179,17143,571,04084,525,1662,913,62987,438,7954,036,8005,515,704382,470-6,961,65116,896,625729,31917,625,94416,304,63522,277,9281,544,796-28,118,10868,245,4672,945,71971,191,186TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 122,972,865491,276,59586,785,732350,527,570

32HKL Annual Report 2012INCOME STATEMENTFOR THE YEAR ENDED 31 DECEMBER 20122012 2011USD Riel ‘000 USD Riel ‘000Interest incomeInterest expense23,200,630(6,574,601)92,686,517(26,265,531)15,402,816(4,300,110)62,211,974(17,368,144)Net interest income16,626,02966,420,98611,102,70644,843,830Other operating income740,1842,957,035974,7353,936,955Operating income17,366,21369,378,02112,077,44148,780,785General and administrativeexpensesProvision for bad anddoubtful loans(11,684,913)(315,068)(46,681,228)(1,258,697)(7,921,202)(328,085)(31,993,735)(1,325,135)Profit before income tax5,366,23221,438,0963,828,15415,461,915Income tax expense(947,859)(3,786,697)(804,869)(3,250,866)Profit for the year4,418,37317,651,3993,023,28512,211,049

HKL Annual Report 2012 33STATEMENT OF CHANGES IN SHAREHOLDERS’S EQUITYFOR THE YEAR ENDED 31 DECEMBER 2012SharecapitalUSDSharepremiumUSDBalance as at 1 January 2011Capital injectionprofit for the yearTransfer to legal reservesDividends2,716,8001,320,000---1,445,9554,069,749---Balance as at 31 December 20114,036,8005,515,704Equivalent in Riel’00016,304,63522,277,928Balance as at 1 January 2012Profit for the yearTransfer to legal reservesTransfer to other reservesDividends4,036,800----5,515,704----Balance as at 31 December 20124,036,8005,515,704Equivalent in Riel’00016,127,01622,035,237LegalReservesUSD234,429--148,041-382,4701,544,796382,470-21,210--403,6801,612,702OtherreservesUSD--------295,162---295,1621,179,171RetainedearningsUSD4,867,462-3,023,285(148,041)(781,055)6,961,65128,118,1086,961,6514,418,373(21,210)(295,162)(157,259)10,906,39343,571,040SubordinateddebtsUSD729,319----729,3192,945,719729,319---729,3192,913,629TotalUSD9,993,9655,389,7493,023,285-(781,055)17,625,94471,191,18617,625,9444,418,373--(157,259)21,887,05887,438,795

34HKL Annual Report 2012STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2012Cash flows from operating activitiesCash generated from/(used in) operating activitiesCash flows from investing activitiesReserve deposits with the Central BankPurchases of property and equipmentPurchases of intangible assetsProceeds from disposals of property and equipmentNet cash used in investing activitiesCash flows from financing activitiesProceeds from borrowingsRepayments of borrowingsProceeds from amounts due to shareholdersRepayments of amounts due to shareholdersProceeds from subordinated debtsProceeds from issuance of share capitalProceeds from share premium on issuance of sharecapitalDividends paidNet cash generated from financing activitiesNet Iecrease in cash and cash equivalentsCash and cash equivalents at the beginning of the yearCurrency translation differencesCash and cash equivalents at the end of the yearUSD6,763,516(2,544,999)(2,190,998)(1,007,404)30,435(5,712,966)16,808,588(13,921,990)4,026,284(4,001,374)---(687,367)2,224,1413,274,6916,708,085-9,982,7762012 2011Riel ’000USD27,020,246 (16,004,159)(10,167,271)(8,753,037)(4,024,579)121,588(22,823,299)(1,042,001)(773,815)(1,185,996)513,660(2,488,152)67,150,309(55,618,350)16,085,005(15,985,489)--20,031,812(7,203,378)6,079,723(2,304,063)2,000,0001,320,000-(2,746,031)8,885,4444,069,749(250,947)23,742,89613,082,391 5,250,58527,093,955(295,156)1,457,500-39,881,190 6,708,085Riel ’000(64,640,798)(4,208,642)(3,125,439)(4,790,238)2,074,673(10,049,646)80,908,489(29,094,444)24,556,001(9,306,110)8,078,0005,331,48016,437,716(1,013,575)95,897,55721,207,1135,907,248(20,406)27,093,955

HKL Annual Report 2012 35Lending and Network PartnersMember OfList On

36HKL Annual Report 2012Contact AddressesHead OfficeNo. 606, Street 271, Sangkat Phsar Doeum Thkov,Khan Chamkamorn, Phnom Penh.P.O Box 2044, Phnom Penh 3Tel: 023 994 304 / 023 224 102E-mail: info@hkl.com.khWebsite: www.khl.com.khOperational Office, Phnom PenhNo. 606, Street 271, Sangkat Phsar Doeum Thkov,Khan Chamkamorn, Phnom Penh.Tel: 023 994 304 / 069 666 264E-mail: bm.hoo@hkl.com.khDongkor Branch, Phnom PenhNo. 1A-2A, Street 110, Sangkat Kakap, KhanDongkor, Phnom Penh.Tel: 023 6335 345 / 069 666 247E-mail: bm.dnk@hkl.com.khDoun Penh Branch, Phnom PenhNo. 92B-92C, Street 70, Sangkat Srass Chork, KhanDoun Penh, Phnom Penh.Tel: 023 6950 099 / 069 666 238E-mail: bm.dnp@hkl.com.khPhnom Penh Branch, Phnom PenhNo. 19GH, Street 271, Sangkat Boeung Salang, KhanToul Kork, Phnom Penh.Tel: 023 6336 346 / 069 666 174E-mail: bmb7@hkl.com.khRussey Keo Branch, Phnom PenhNo. 150, National Road 5, Sangkat Chrang Chamress1, Khan Russey Keo, Phnom Penh.Tel: 023 6344 668 / 069 666 124E-mail: bm.rsk@hkl.com.khBattambang Branch, Battambang ProvincePreakmohateab Village, Sangkat Svaypor, KrongBattambang, Battambang Province.Tel: 053 6387 487 / 069 666 254E-mail: bmb9@hkl.com.khBavel Branch, Battambang ProvinceBavel 1 Village, Bavel Commune, Bavel District,Battambang Province.Tel: 053 6660 099 / 069 666 251E-mail: bm.bvl@hkl.com.khPursat Branch, Pursat ProvinceNational Road 5, Sathaney Village, Sangkat Svay Art,Krong Pursat, Pursat ProvinceTel: 052 6363 573 / 069 666 130E-mail: bmb1@hkl.com.khBakan Branch, Pursat ProvinceNational Road 5, Beoung Khnar Village, BeoungKhnar Commune, Bakan District, Pursat Province.Tel: 052 6363 474 / 069 666 261E-mail: bm.bkn@hkl.com.khKampong Cham Branch, Kampong Cham ProvinceNational Road 7, Beoung Snay Village, SangkatSambour Meas, Krong Kampong Cham, KampongCham Province.Tel: 042 6387 487 / 069 666 237E-mail: bmb8@hkl.com.khPrey Chhor Branch, Kampong Cham ProvinceNational Road 7, Prey Tortoeung Village, ChhreyVeang Commune, Prey Chhor District, KampongCham Province.Tel: 042 6367 467 / 069 666 152E-mail: bm.pch@hkl.com.khTboung Khmom Branch, Kampong Cham ProvinceNational Road 7, Choeunglorng Village, SangkatSoung, Krong Soung, Kampong Cham Province.Tel: 042 6908 332 / 069 666 093E-mail: bm.tkm@hkl.com.khMemot Branch, Kampong Cham provinceNational Road 7, Tboung Wat Village, MemotCommune, Memot District, Kampong ChamProvinceTel: 042 6339 798 / 069 666 204E-mail: bm.mmt@hkl.com.kh

HKL Annual Report 2012 37Stueng Sen Branch, Kampong Thom ProvinceNo 46, National Road 6, Sangkat Damrey Chankhla,Krong Stueng Sen, Kampong Thom Province.Tel: 062 6363 573 / 069 666 105E-mail: bmb5@hkl.com.khBaray Branch, Kampong Thom ProvinceNational Road 6, Kampong Thmor Village, Kampong ThmorCommune, Santuk District, Kampong Thom Province.Tel: 062 6363 900 / 069 666 257E-mail: bm.barray@hkl.com.khStong Branch, Kampong Thom ProvinceNational Road 6, Chheu Teal Village, Kampong ChenTboungCommune, Stong District, Kampong Thom Province.Tel: 062 6387 487 / 069 666 107E-mail: bmb2@hkl.com.khSiem Reap Branch, Siem Reap ProvinceNational Road 6, Chong Kaosu Village, SangkatSlarkram, Krong Siem Reap, Siem Reap Province.Tel: 063 6786 111 / 069 666 120E-mail: bmb4@hkl.com.khChikreng Branch, Siem Reap ProvinceNational Road 6, Kampong Kdey 2 Village, KampongKdey Commune, Chikreng District, Siem ReapProvince.Tel: 063 6902 261 / 069 666 248E-mail: bm.ckg@hkl.com.khSotrnikum Branch, Siem Reap ProvinceNational Road 6, Damdek Thmey Village, DamdekCommune, Sotrnikum District, Siem Reap Province.Tel: 063 6363 676 / 069 666 110E-mail: bm.snk@hkl.com.khPurk Branch, Siem Reap ProvinceNational Road 6, Chambak Haer Village, PurkCommune, Purk District, Siem Reap ProvinceTel : 063 6363 575 / 069 666 157E-mail: bm.puk@hkl.com.khBanteay Meanchey Branch,Banteay Meanchey ProvinceNo. 152-153, Village 3, Sangkat Preash Ponlea,Krong Serey Sophorn, Banteay Meanchey Province.Tel: 054 6333 799 / 069 666 258E-mail: bmb6@hkl.com.khPoi Pet Branch, Banteay Meanchey ProvinceNo. 091, Palelai Village, Sangkat Poi Pet, Krong PoiPet, Banteay Meanchey Province.Tel: 054 6333 787 / 069 666 173E-mail: bm.ppt@hkl.com.khThmor Puok Branch, Banteay Meanchey ProvincePhsar Thmey Village, Kumro Commune, Thma PuokDistrict, Banteay Meanchey Province.Tel: 054 6333 788 / 069 666 091E-mail: bm.tpk@hkl.com.khTakmao Branch, Kandal ProvinceNo. 166, National Road 2, Kropaeiha Village,Sangkat Preak Russey, Krong Takmao, KandalProvince.Tel: 024 6669 666 / 069 666 094E-mail: bm.tmo@hkl.com.khKieng Svay Branch, Kandal ProvinceNo. 350, National Road 1, Toul Thnout Village,Korkir Commune, Kieng Svay District, KandalProvince.Tel: 024 6336 356 / 069 666 217E-mail: bm.kvy@hkl.com.khMukkampuol Branch, Kandal ProvinceNo. 36, National Road 6, Preak Tabaeng Village, Preak AnhChanh Commune, Mukkampuol District, Kandal Province.Tel: 024 6690 999 / 069 666 183E-mail: bm.mkp@hkl.com.khPrey Veng Branch, Prey Veng ProvinceNational Road 11, 8 Village, Sangkat Kampong Leav,Krong Prey Veng, Prey Veng Province.Tel: 043 6363 373 / 069 666 145E-mail: bm.pvn@hkl.com.kh

38HKL Annual Report 2012Peam Ror Branch, Prey Veng ProvinceNo. 13, National Road 1, Oddom Village, PreakKhsay Ka Commune, Peam Ro District, Prey VengProvince.Tel: 043 6363 375 / 069 666 175E-mail: bm.pro@hkl.com.khTakeo Branch, Takeo ProvinceNational Road 2, Lo Ri Village, Sangkat Ro KarKhnong, Krong Doun Keo, Takeo ProvinceTel: 032 6322 218 / 069 666 101E-mail: bm.tak@hkl.com.khPrey Kabbas Branch, Takeo ProvincePrey Lvea Kert Village, Prey Lvea Commune, PreyKabas District, Takeo ProvinceTel: 032 6345 455 / 069 666 150E-mail: bm.pkb@hkl.com.khKampong Chhnang Branch,Kampong Chhnang ProvinceNotional Road 5, Toul Kralanh Village, SangkatKampong Chhnang, Krong Kampong Chhnang,Kampong Chhnang Province.Tel: 026 6363 373 / 069 666 232E-mail: bmb10@hkl.com.khKampot Branch, Kampot ProvinceNo. 64, National Road 3, Krang Village, SangkatKrang Ampil, Krong Kampot, Kampot Province.Tel: 033 6696 696 / 069 666 219E-mail: bm.kpt@hkl.com.khKampong Speu Branch, Kampong Speu ProvinceNational Road 4, Krang Poltep Village, Sangkat RokaThum, Krong Cba Mon, Kampong Speu Province.Tel: 025 6666 175 / 069 666 230E-mail: bm.ksp@hkl.com.khPreah Sihanouk Branch, Preah Sihanouk ProvinceNo. 480, Eakreach Street, 02 Village, Sangkat 4,Krong Preah Sihanouk, Preah Sihanouk Province.Tel: 034 6341 717 H/P: 069 666 154E-mail: bm.snv@hkl.com.khKoh Kong Branch, Koh Kong ProvinceNo. 504, Street 48, 01 Village, Sangkat SmachMeanchey, Krong Khemmarak Pumin, Koh KongProvince.Tel: 035 6743 777 / 069 666 213E-mail: bm.kkg@hkl.com.khSvay Rieng Branch, Svay Rieng ProvinceNo. 11, National Road 1, Soun Thmey Village,Sangkat Prey Chhlak, Krong Svay Rieng, Svay RiengProvince.Tel: 044 6366 686 / 069 666 104E-mail: bm.svg@hkl.com.khKratie Branch, Kratie ProvinceNational Road 7, Orussei 1 Village, Sangkat Orussei,Krong Kratie, Kratie Province.Tel: 072 6560 777 / 069 666 208E-mail: bm.kte@hkl.com.khStueng Treng Branch, Stueng Treng ProvinceStreet 7 Chas, Prek Village, Sangkat Stueng Treng,Krong Steung Treng, Steung Treng Province.Tel: 074 6737 444 / 069 666 108E-mail: bm.stg@hkl.com.khMondulkiri Branch, Mondulkiri ProvinceNational Road 76, O’ Spen Village, Sangkat SpenMeanchey, Krong Sen Monorom, MondulkiriProvince.Tel: 073 6982 555 / 069 666 185E-mail: bm.mkr@hkl.com.khRatanakiri Branch, Ratanakiri ProvinceNo. C7, 1 Village, Sangkat La Ban Siek, Krong BanLung, Ratanakiri Province.Tel: 075 6666 660 / 069 666 129E-mail: bm.rkr@hkl.com.khOddar Meanchey Branch,Oddar Meanchey ProvinceNational Road 68, Somruong Village, SangkatSomruong, Krong Somruong, Oddor MeancheyProvince.Tel: 065 6556 565 / 069 666 176E-mail: bm.omc@hkl.com.khPreah Vihear Branch, Preah Vihear ProvinceLor Eth Village, Sangkat Kampong Pranak, KrongPreah Vihear, Preah Vihear Province.Tel: 064 6963 666/ 069 666 153E-mail: bm.pvh@hkl.com.kh